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Wednesday

The pin bar –
MACD strategy involves using candlesticks (or OHLC bars) and the MACD indicator
to form a simple trading method. This system is best used in 4-hour charts –
and if used correctly – should provide simple profits.

But
before we go through the strategy, learning how candlesticks work is essential.
Candlesticks contain data on open, high, low, and close values for each period.
The thin lines on the top and bottom represent high/lows of a particular time
period. The high is called the upper shadow, while the low is called the lower
shadow. If a forex pair closes higher than the opening price, then a hollow
candlestick is formed while a black one is formed if the close is lower than
the opening price.

A pin
bar is a candlestick whose upper shadow or lower shadow is far longer than the
other one, and is often accompanied by a small real body. A bullish pin bar
contains a long lower shadow, a small body and a small upper shadow, whereas a
bearish pin bar contains a long upper shadow, a small body and a small lower
shadow. A bearish pin
bar is shown in the picture below.

Shadows
– or wicks, as they are called – represent buying and selling pressure. A long
upper wick would show that the bulls tried hard but the bears overcame in the
end – thus, the bears won and the sentiment is likely to continue in the near
future.

Once the concept
of the pin bar is understood, the strategy should become easy for a trader. His
trading should be in a 4 hour timeframe with only MACD as a technical indicator
(default settings of 12,26,9 are recommended). This strategy works with all
currencies – it’s that simple!

Once the trading
setup is understood it’s time to go over the rules. These are as follows:

1.The 4 hour MACD should be below 0 (and likely to be bearish).

2.A bearish pin bar is spotted on the graph.

3.Set your stop loss 1 pip above the highest point of the pin bar,just so you don't wipe out your account.

4.Your trading objective should be to have a 1:2 risk-reward or even better.

The rules for
buy trades are the same, except the 4H MACD should be above 0, and the stop
loss should be 1 pip below the lowest point of the wick.

The chart above
shows two short entries, as pin bars were seen and MACD was below 0. The trade
ended with a 116 pips profit, while the second ended at break even.

Monday

On Friday all
eyes were on Bernanke as it was thought that he would lay some ground for the
FOMC meeting and decision on 13th September.Although it was said
that action was necessary to facilitate the labour markets,traders were still
unsure whether QE3 was coming or not.This week we won’t see quantitative
easing affecting our charts.

The Japanese Yen
has been strengthening and has recently caught the eyes of the Bank of Japan
and Ministry of Finance.Meanwhile,the US Dollar has been declining itself
again.The price action and low volatility still haven’t made a case for
intervention,but Bank of Japan may intervene at some point.They are known for
stealth tactics.

Examining the 2
hour frame chart above,we can see that the pair been moving sideways since the
past month.However,the past 10 days saw a significant sell-off,after which
the price has been edging lower.Currently,the pair is hovering between the
support level of 78 and the resistance level of 78.7,and it is most likely
that the price should stay here for most of the time. However,in case it
breaks the support level,a short trade could be initiated,whereas a long
trade could be executed in case the resistance level breaks.

MACD has been
moving down and sideways throughout the past week,but has stayed below 0. This
shows that there is a bearish atmosphere as the price continues to move within
the support and resistance levels.However,currently MACD is edging upwards,which may indicate signs of a weak rally – since it is still below 0.

Stochastics have
been moving upwards lately and should reach the overbought level if the pace
continues.They are likely to oscillate less than 10 times throughout the week,so they should be taken in consideration with other signs.

Since the pair
is trading sideways,one could look for signs of price oscillations.If these
oscillations become long enough,one could initiate long and short trades along
the waves.

Fundamental: The
price of USD is still uncertain as Ben Bernanke’s announcement on the 31st
did little to confirm QE3.Therefore,this week won’t be affected by these
measures. Nevertheless,USD is moving downwards since the past month,but may
stay towards the upper side of the bearish channel.

Technical:

The 2H chart
shows the current bearish channel USD/CHF is in. A regression analysis since
the 25th of July shows that the price tends to oscillate in the
boundaries,but since the past 10 days it has remained in the lower end of the
channel.If the price breaks out from the resistance line at 0.9667,then a
long position would be applicable.However,it is most likely that the pair
would continue to plummet.Therefore,the support line at 0.9448 should be seen
as a breakout could see a steady fall of the pair.

MACD is bearish
as it is below 0,but is moving sideways.This shows some uncertainty in the
market,but the bias is towards the negative side.Stochastics have fallen from
the overbought level,and are currently moving upwards again.However,the
price is still largely stagnant so support and resistance levels may be better
indications.

The USD/CHF
bearish pattern is occurring due to the fall of USD,as seen in the chart
below:

USD seems to be
moving sideways since the past few weeks,but it is in a larger bearish
pattern.An introduction of QE3 could make it plunge,along with the USD/CHF
pair.

MACD on the USD
is bearish and below 0,signalling a decline.Stochastics have just reached the
overbought level and are coming down again.Therefore,both signals are bearish
for USD. However,if they break out from the upper channel at 10,033,then a
long trade for USD/CHF would be favourable.

Fundamental:
Those who were tuned in for Ben Bernanke’s Jackson Hole speech would be left
disappointed as the Fed did not commit to QE3. There is uncertainty in the
market whether quantitative easing will occur or not,nevertheless,it should
not affect this week’s outlook.

USD has been
declining since the past month,however,it is likely to remain on the upper
side of the bearish channel it is currently in. A breakout from the upper
channel line at 10,040 would signal a bullish rally, which could be bearish for
GBP/USD, provided GBP does not rally as well.

Trade numbers
for UK have been disappointing,with a £10 billion short-fall on the
goods/services balance.Exports to Europe are weakening as the UK tries to find
other markets.The country’s central bank will be expanding its QE program to
£425 billion,up from £375 billion.

The UK PMI for
August is 49.5, which is better than expected. Consumer goods producers have
also seen their outputs increased, so GBP has been appreciating. This is a good
sign for the economy, but the outlook is still poor as demand and investment
spending are weak.

Looking
at the 2H chart,we can see the GBP has been edging upwards lately.The 2 month
regression channel shows that GBP/USD has been bullish,even though it is
highly oscillating. From the 21st of August,it has stayed in the
upward level of the channel, where a lot of support and resistance lines exist.If the price breaks through from the 1.59
resistance level, a long trade may be favourable.On the other hand,if the
price breaks the support level of 1.5812,it could move in the lower level of
the channel,and even hit the lower end.Given the current circumstances,a
bullish rally is more likely.

Stochastics are
currently moving sideways. Even though they are currently in a bullish mode,
the signal is quite uncertain. MACD is still pointing higher, but its trend is
not as strong as before.

Therefore,
support and resistance lines should be given the most importance. Any
breakthroughs can trigger long or short trades.

Sunday

Fundamental: The
most important news for the pair was Ben Bernanke’s speech at Jackson Hole on
the 31st. The central bank still hasn’t clearly announced that the
next round of Quantitative Easing will occur, and the conference suggested that
it will stay on the side lines for the time being. QE depreciates the USD and
appreciates the pairs, so a serious decline in the dollar is still away.

The chart above
shows the USD with regression channels. The price is moving in a downward
channel so far. Any confirmations of QE3 will pressurize the price to plummet
further.

An important
event to look out for is the announcement by European Central Bank president
Mario Draghi, as he plans to introduce measures which should address the
problems of Spain and Italy. These measures are likely to include buying bonds
of the two nations to reduce their borrowing costs. EUR is currently strong in
anticipation of these measures,however,if they are found to be ineffective
the pair could plummet once again.

Technical:

Examining the H2
timeframe, EUR/USD has been rising weakly since the past week. A 10 day
regression analysis shows that the pair is making gains and is currently
staying on the above line of the channel. This is reflected by the current
market view that ECB will introduce effective measures, and that the Fed may
introduce QE3.

Stochastics are
currently bullish and edging towards 80, signalling that there may be some
gains made in the coming day. MACD, however, is moving sideways – and even
though it is currently bullish – it signals uncertainty in the market.

EUR/USD is best
traded on market news these days, as any sign of good or bad news shifts the
price significantly. The bullish rally could easily be reversed due to the ECB;
it is well known that the European Central Bank is quite divided and has yet
not reached to a permanent solution.

On a closer view
of the chart, the pair seems to be showing bearish signs. Friday’s close ended
with a shooting star candle, and if the price breaks through the support line
of 1.2425, a sell-off rally may occur. On the other hand, if the price exceeds
the resistance lines of 1.2692 and 1.27, then long trades would be more
favourable. However, a bearish mood exists for this week so any signals for
shorting should be picked up.

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